As the industry focuses on decommissioning, Shell said Monday it made a final investment decision on the first manned installation for the North Sea in decades.
Royal Dutch Shell said it made a final investment decision to redevelop the Penguins oil and gas field in the British waters of the North Sea using a floating production, storage and offloading vessel. The project is expected to stay competitive so long as the price of crude oil stays above $40 per barrel and the project is the first plan for a manned installation for the North Sea in nearly 30 years.
“Having reshaped our portfolio over the last twelve months, we now plan to grow our North Sea production through our core production assets,” Steve Phimister, a Shell vice President for exploration and production in the United Kingdom and Ireland said in a statement.
The Penguins field processes oil and gas through the Charlie platform situated in the Brent complex in the North Sea. The floating production vessel is necessary because of decommissioning, Shell said.
Field maturation has forced the idling of several production platforms and Shell is in the midst of a multi-million-dollar plan to take them down. The British government estimated it could cost about $77.3 billion to decommission offshore infrastructure. Energy consultancy Westwood Group said up to $100 billion in spending on decommissioning is expected for Western Europe over the next 20 years.
Trade group Oil & Gas U.K. said the commitment to the North Sea from the Dutch supermajor is a vote of confidence.
“It also shows the importance of the efficiency improvements our industry has delivered which have helped make redevelopment projects like this commercially attractive,” Oil & Gas U.K. Chief Executive Deirdre Michie said in a statement. “We are hopefully entering a more positive phase for our industry in the United Kingdom with new projects on the horizon that I hope will bring a much needed boost for companies in the supply chain.”
Shell expects its floating platform will have a peak production capacity of around 45,000 barrels of oil equivalent per day. Oil will be sent to refineries by tanker and gas will be sent through a submarine pipeline to a terminal in Scotland.
Engineering and construction company Fluor has the engineering, procurement and construction contract for the Shell facility. No values were given for development.
Shell, retooling after the 2015 megamerger with British energy company BG Group, has plans to leave oil and gas operations in handful of countries as part of a $30 billion divestment program. Around $23 billion of that has been completed to date. The company completed $4.4 billion in sales the day before releasing its earnings report for the third quarter.
By Daniel J. Graeber